Consumer Price Index; tax reform; Labor leadership; immigration – Press Conference, Treasury Place, Melbourne

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Consumer Price Index; tax reform; Labor leadership; immigration – Press Conference, Treasury Place, Melbourne

Press Conference

Treasury Place, Melbourne

Tuesday, 25 January 2005

12 noon


SUBJECTS: Consumer Price Index; tax reform; Labor leadership; immigration


The Consumer Price Index for the December quarter shows a rise of 0.8 per

cent and the Consumer Price Index shows a rise of 2.6 per cent over the year

to December of 2004. Today’s figures show that inflation remains moderate

in Australia and within the target band which the Government has set by agreement

with the Reserve Bank.

Contributors to the increase in the Consumer Price Index included automotive

fuel prices, automotive fuel prices added 0.1 of a percentage point to the consumer

price index and it actually added 0.6 over the course of the year. So, if you

extract from that the effect of automotive fuel prices you see that in the December

quarter, the CPI would have increased by 0.7 per cent and 2 per cent through

the year. The point I am making here is that automotive fuel prices are a significant

component of that CPI.

House purchase prices increased in the December quarter, there was a seasonal

increase in domestic holiday travel, motor vehicle prices went up although I

draw to your attention that on 1 January the tariff will be dropping and you

would expect that prices would begin to fall. And there was a substantial increase

in food prices driven we think mainly by poor seasonal conditions in Queensland.

But overall what it shows is that notwithstanding a strong economy, notwithstanding

the lowest unemployment we have seen in a very long time in Australia, inflation

remains moderate. Nonetheless we shouldn’t get complacent. It is important

that we continue working at keeping the Australian economy strong so that more

people can have job opportunities and we can ensure that we meet the challenges

which lie in front of us.


Given that the dollar remains high and inflation fairly low, any cause for

the Reserve Bank to revisit interest rates this year at all?


Look, this is a moderate outcome, that’s the way I would put it. 2.6

per cent, as I said a large component of that is petrol, and you would have

seen already in the month of January, petrol prices coming down. I welcome that.

I hope they stay down. If petrol prices stay down during the course of the March

quarter that will take a component of the CPI back out again. So, this is a

moderate outcome and it is consistent with a growing economy on a steady and

sustainable basis.




Well this is an inflation outcome that is within the target band. We set a

target band for inflation at 2 to 3 per cent. This is an inflation outcome that

is consistent with that band.


Mr Costello, just on the matter of tax, do you agree with this push by the

so-called ‘ginger group’ of Coalition MPs that are pushing for more

substantial tax reform, tax cuts as part of a broader welfare package?


Look I think that taxes should always be as low as possible, consistent with

balancing the Budget, keeping interest rates low, properly funding health, education,

social services and defending the country and that is what we work to do. In

the tax area over recent years we have managed to cut company tax and we’ve

managed to halve capital gains tax. We have managed to have indirect taxes abolished

and we want to have another one abolished from 1 July of this year. We have

managed to cut income taxes in last year’s Budget and in the Budget the

year before, we have got further income tax cuts taking place on 1 July of 2005.

We are always working to keep taxes as low as we possibly can consistent with

a strong economy, a balanced Budget, low interest rates and the proper and adequate

funding of social services.


With the Budget surplus forecasts looking pretty healthy is there scope for

like a step change in reducing the marginal rate of tax that these ‘ginger

group’ MPs are pushing for?


Well we cut income taxes as I recall by $14 billion in last year’s Budget,

so those income tax cuts are still taking place, and due to continue.


So what would be your message to those MPs?


I would say that if anyone wants to put ideas to the Government on tax, they

are very welcome to do so, and we are very welcome to receive proposals. There

is no reason to delay them. That we would be very welcome to receive any positive

ideas that people want to put forward. But the ideas obviously have to be consistent

with keeping a balanced Budget, keeping low interest rates, properly funding

the health system, social welfare, our defence commitments, the war on terror

because we are not going to give any of those things up.


So they are being too ambitious then do you think?


Well I have not seen their proposals, but if proposals that are put forward

are consistent with all of that, we would be very happy to receive any such

proposals done in a positive spirit.


How would you regard Mr Beazley’s return to the Labor leadership?


Look, Mr Beazley is somebody who has served the Labor Party well over a number

of years. He led the Labor Party to elections in 2001 and in 1998, so he has

certainly got a track record in the Labor Party. And if he is returned to the

Labor Party leadership for a third time, then we will listen to his ideas in

the Parliament and we will debate his ideas. But, we will be very searching,

because during his first and second campaigns, I think he left a lot of unanswered



I think there was a poll on the weekend that showed that while voters preferred

Mr Howard as Prime Minister, Mr Beazley was preferred to you. How would you

handle going up against Mr Beazley?


Well I have had many debates with Mr Beazley, and you will recall that I had

to pick up the Budget he left it in 1996 when it was $10 billion in deficit.

So I am used to engaging with Mr Beazley, and engaging with the outcomes of

his actions.


Would he be a formidable opponent than Mark Latham or Simon Crean?


Look Mr Latham has retired from politics, we wish him well in relation to

his health. Mr Crean has retired from the front row of politics, and we wish

him well, and if Mr Beazley wants to return to the front row of politics, then

we will engage with him on his policy ideas, and on his record, and the question

will be for the Australian public to determine those issues.


Do you have any response to Andrew Demetriou’s recent comments on the

state of Australia that he made last week?


Well, Mr Demetriou is entitled to put his views forward. And I read them.

I wouldn’t agree with a lot of what he said. I think you can idealise

the past. I think today Australia is in many respects much more tolerant than

it was in the 50’s and the 60’s. In the 50’s and the 60’s

if you were a Chinese immigrant you couldn’t get into Australia, whereas

you can now. And to go back and to say, oh well that was an idealistic time

in the 50’s and the 60’s where large numbers of people were excluded,

maybe not Cypriots, but certainly people of Asian descent, and to say that they

were somehow more tolerant I think is just, is just wrong. He has just made

a very significant error of history.

Now where do we take it from here? I think we can point to the successes of

the immigration programme in the 50’s and the 60’s as a way of going

forward into the 90’s and the 2000’s. The immigration intake will

be wider today, but we would hope that the immigrants of later generations would

do was well as the immigrants of the 50’s and 60’s.

Have a look, the thing that always amazes me is when you have a look at some

of these school results. Have a look at the kids that are now starting to top

our school results – many of them Asian, Vietnamese backgrounds –

I think that is a wonderful thing.

Who knows, maybe there will be a Vietnamese or a Chinese AFL Chief Executive

in 10 years or 20 years, wouldn’t that be a wonderful thing? We can see

the values of immigration and tolerance and success played out on a much wider

canvas in the future. But to say that today is somehow less inclusive or tolerant

than things were in the 50’s and 60’s I think is just wrong.


So is he wrong on Tampa?


Well look he is entitled to his views. But you know Andrew’s strengths

are probably more in the AFL area than in political history. That is the way

I would put it.


Treasurer are you planning to meet the head of the mining company Xstrata

in relation to its bid for WMC?


Yes. Xstrata will be welcome to put its position to.


So you will be meeting with Mick Davis the Chief Executive?


Well I don’t know who Xstrata will choose to put their case to me. But

Xstrata will be welcome to put its case to me, yes.


Do you have any views on that at the moment?


I haven’t heard all of the submissions and I won’t be making a

decision until I have heard all of the submissions.


Do you support the Finance Minister’s push to scrap the surcharge on

high income earners super?


Well, I announced in the most recent Budget a proposal to cut it in half.

And we were unable to actually legislate that. My policy for several years has

been to reduce the rate and it in fact is Government policy to cut it in half.


Will that go through when you gain control of the Senate?


Well, we couldn’t get it through, the Labor Party opposed that. If the

Labor Party wants to change its position I will be very, I would welcome it

to do so. If the Labor Party does not want to change its position we might have

another go when the numbers in the Senate change.

Okay thanks very much.


Just one quick one. Back to the tax issue if I may. Mr Minchin said that the

proposals were unrealistic. Do you, would you, agree with what he commented?


Look, the way I see it is that numbers of people have different views on taxes.

There is no uniform group view on tax in the backbench. There is no society

that has its own policy. I think there are some people who have productive and

achievable plans and there are probably some that don’t. But I can’t

comment on those plans until such time as I have seen the plans. Now if anybody

wants to publish a plan and give it to me I will assess it just like I do. Just

like I assess the Labor Party’s plans. But you have got to publish your

plan and put it out there if you want to get meaningful feedback.


But it’s been canvassed a bit…


I don’t think so. No, I don’t think any uniform plan at all has

been canvassed. There has been a suggestion that later in the year something

might be put to the Government. As I say, I am always willing to receive ideas.

We are open for business all the time – for policy that keeps tax low,

balances the Budget, pays for health, social security, welfare, the war on terrorism,

the adequate defence of the country and takes pressure off interest rates –

that is what we are open for business for.